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Posted on Sat, Oct 22, 2011 : 5:59 a.m.

Ypsilanti's survival as a city is at stake as it weighs options to raise revenues

By Guest Column

Editor’s note: Paul Schreiber is the mayor of Ypsilanti.

The city of Ypsilanti is at a fiscal crossroads and must replace lost tax revenues to survive. Falling property taxes and state revenue sharing cuts have created a severe structural general fund deficit that must be addressed immediately.

Declining property values are projected to reduce general fund property tax revenues from $6.7 million in 2010 to $4.4 million in 2017. This 35 percent revenue decline decimates funding for police and fire services as well as administrative functions at City Hall. Cutting staff to balance the general fund budget would eliminate 41 current employees, including some police officers and firefighters. The result would be a city with less than 32 employees by 2017. Reducing public safety and other city services is an untenable option.

Ypsilanti Mayor Paul Schreiber

Over the past decade Ypsilanti has significantly cut its budget. In 2003, the city Parks and Recreation Department and funding for human services was eliminated. In 2008, 14 vacant staff positions were eliminated, including six in the Police Department. In 2010, the city laid off two police officers.

Ypsilanti city government is now a lean organization with no redundancy. For example, the assistant city manager is also the human resources director, the planning department director, and the building official. Further cuts to staffing will result in the loss or delay of police and fire protection, planning, zoning, and infrastructure services. It is clear that City Council must consider revenue increases for the long-term sustainability of the city of Ypsilanti.

The laws governing Michigan cities limit the options for reducing expenses and raising taxes. What follows are the viable and not-so-viable options before City Council:

Give Water Street back to the bank?

Some have suggested eliminating the $1.3 million annual Water Street bond payment by giving the property back to the bank. In fact, Michigan state law requires payment of the $1.3 million annual bond; it is not like a mortgage that can be unloaded. Even if City Council were to decide to withhold funding, the bondholders could sue the city to require payment. The Water Street bond must be paid.

Turn the city over to a state-appointed emergency manager?

Some have suggested that a state-appointed emergency manager should take over Ypsilanti. An emergency manager would be saddled with the same lack of tax revenue that City Council is grappling with. An emergency manager can’t erase the Water Street debt. An emergency manager can’t raise taxes without voter approval. Finally, and most important, an emergency manager will not be representing the city’s residents. Turning the city over to an emergency manager is a terrible option.

Fold the city into Ypsilanti Township?

Some have suggested that the city should become part of Ypsilanti Township. But even after dissolution, city residents must still meet their financial obligations such as the Water Street bond payment. The township board would have the power to levy property taxes on the former city residents to pay outstanding financial obligations. Dissolution of the city will not solve its financial problems or transfer financial obligations to township residents.

Increase property taxes?

The state constitution limits general fund property taxes to 20 mills. Ypsilanti is at that limit. Police and fire protection as well as planning, zoning, and other city services are paid out of the general fund. Property taxes outside of the general fund must be dedicated for specific purposes.

A dedicated police and fire property tax can’t be proposed unless it funds a separate police or fire authority. An authority is an agreement between two or more municipalities to share services and costs. The city and the township have funded a police authority study and committee discussions are ongoing, but no action has been taken.

A dedicated property tax levy to pay the $1.3 million annual Water Street bond debt is a possibility. It would ease the burden on the general fund, and it would provide more funding for police, fire, and other services. The levy can be proposed by City Council, but it must be approved by voters. Unfortunately, if a Water Street bond tax levy were approved in 2013, the general fund reserves are projected to last only one additional year. More tax revenue is needed to balance the budget. Even so, City Council is evaluating a Water Street bond tax levy.

Institute a city income tax?

Because the city is at the maximum 20 mills property tax rate for the general fund, City Council is evaluating a city income tax proposal. An income tax would replace the revenues that will disappear due to the decline of property values and loss of state funding. According to state law, a city income tax of up to 1 percent can be imposed on residents, and half the rate on residents can be imposed on nonresidents working in the city. A city income tax must be approved by voters. In Michigan twenty-two cities have a city income tax. Property taxes can be reduced to offset the income tax. City Council has directed city staff to update the 2005 income tax study to provide a more accurate estimate of city income tax revenues.

Add a storm water utility fee?

City Council has the option of imposing a storm water utility fee based on the impermeable surface area of a property. This fee would apply to all taxable and nontaxable property and only requires City Council’s approval. Revenues would supplement funds to repair major streets. City Council is considering a storm water utility fee.

Ypsilanti City Council will hold three public goal-setting meetings on Tuesday evenings at 6 p.m. at City Hall to finalize a plan to balance the budget. The meeting dates are Nov. 1 and 29 and Dec. 13.

Along with the six other members of Ypsilanti City Council, I welcome everyone to the meetings and ask you to bring your comments and suggestions.

Comments

Monica R-W

Sun, Oct 23, 2011 : 8:10 p.m.

We talked about this article on Reach Out Job Search Radio Podcast today covering Michigan/National/Local Politics! Check out our conversation in the Second Hour of the show here!
<a href="http://www.blogtalkradio.com/rojsradio/2011/10/23/reach-out-job-search-radio-show-join-into-the-conversation" rel='nofollow'>http://www.blogtalkradio.com/rojsradio/2011/10/23/reach-out-job-search-radio-show-join-into-the-conversation</a>

cette

Sun, Oct 23, 2011 : 8:05 p.m.

I agree, it's reminiscent of the situation in Flint.
Don't know the real answer, but it's certainly looks like the city will slowly be starved into a much lesser existence under an EFM.

Dog Guy

Sun, Oct 23, 2011 : 5:41 p.m.

Thank you, Mayor Schreiber, for admitting that a stormwater fee is a non-voted non-deductible secret tax. The kleptocracy in Ann Arbor never tells the truth about anything.

YpsiVeteran

Sun, Oct 23, 2011 : 4:06 p.m.

City residents who find themselves thinking, &quot;Great, now they want more money,&quot; need to stop and think. The city doesn't want &quot;more&quot; money. It wants back a portion of the money it was already getting in property taxes that city residents are now not paying. Tax bills have gone down for a few years now. If vital city services, like police and fire, are reduced any further, your property values will be futher depressed, and you will have the added insult of increased homeowners and auto insurance rates.

joe.blow

Sun, Oct 23, 2011 : 12:27 p.m.

Here is a lesson to you AA. AA is able to be wasteful with it's money and be extremely liberal because it has the UofM to tax the crap out of and other large corporations! So don't blow it, AA could turn into Ypsi with one slap to the reputation.

MikeyP

Mon, Oct 24, 2011 : 2:34 a.m.

In a way you're wrong in that AA can't tax the crap out of UofM. In fact one of the more prominent complaints from Ann Arborites is due to the fact that AA can't tax UofM at all! UofM doesn't pay property taxes. Neither does EMU.
However, UofM does attract a lot of people and businesses that AA can tax the crap out of.

Ellen

Sun, Oct 23, 2011 : 4:56 a.m.

As a long term resident of Ypsi, I am more than disappointed in the current council. I am categorically opposed to an income tax. I am, to be honest, opposed to the level of tax I am paying now. I've owned a home in the city for ten years, have paid my fair share of taxes, voted No on the proposed income tax several years ago, and am now being asked for more money? It's my understanding that several businesses wanted to move onto the Water Street property, including Costco and Burger King, and that they were not permitted to build. What are we doing to get any businesses there? I don't see a for sale sign on Michigan Ave. Why is the only &quot;solution&quot; for Water Street coming from my wallet? And I don't see where the money is going. Health benefits for retirees? Cut them. Private enterprise has already done so. Encourage volunteers at the Fire station and auxiliary officers for the police. Northville has a very successful volunteer fire department, and other cities - including Inkster - use auxiliary police officers to good effect. If you can't sell the blighted homes in Ypsi, demolish them. I'm tired of driving past condemned homes that have been red stickered for at least a year. My message to the council? Figure it out. Look at your basic assumptions and see what we can live without. That's what your citizens have to do.

YpsiVeteran

Sun, Oct 23, 2011 : 4:09 p.m.

...sorry, I said vote for the &quot;sales&quot; tax. Vote for the income tax. Although, a city sales tax wouldn't be a bad idea, and it would spread the burden around more, to include everyone, not just property owners and emploees of city businesses.

YpsiVeteran

Sun, Oct 23, 2011 : 4 p.m.

As a &quot;long-term resident&quot; of Ypsilanti, you are a part of the reason unqualified, uneducated and inexperienced people were elected to the city council and made financially untenable decisions. Past, and to a somewhat lesser extent, current council members have spent their time arguing about the personal lives of city employees and costing the city money rather than make sound financial decisions.
You apparently haven't attended many council meetings, since retiree benefits have been reduced. The state constitution rightly prohibits some retroactive benefits changes, but new hires in some departments, like police, already have to work more years to retire and have a reduced multiplier. The city's police and fire unions have voluntarily increased their own health care premium payments and have reduced their incomes.
If your property value was even close to what it used to be, you'd be paying the money anyway. Have you offered to continue to pay the difference, to maintain the service levels you expect? I thought not. As the mayor points out, property taxes would be reduced to offset the sales tax. Quit whining, realize the city is still financially viable and is working to offset future problems, and vote for the sales tax.

kelly

Sun, Oct 23, 2011 : 12:58 p.m.

If Costco really wanted to build on Water Street and was turned down, than Ypsilanti's &quot;leaders&quot; are truly clueless.

Andrew Jason Clock

Sat, Oct 22, 2011 : 8:55 p.m.

Its been pointed out to me I'm not very clear on how I think the planning or historical commissions, or city inspectors. could work better. To be clear, I think that Ypsilanti needs to change it's customer service culture. We need to be better at communicating, better at responding, better at following up. We need to approach each situation from a &quot;let's see what we can do&quot; standpoint, not a &quot;you can't do that&quot; standpoint.

RUKiddingMe

Sat, Oct 22, 2011 : 7 p.m.

We can watch this unfold all over again in Ann Arbor, unless someone stops the Fuller Station project. The similarity between Fuller Station and Water Street is absolutely uncanny.

Goober

Sat, Oct 22, 2011 : 6:10 p.m.

We need to come to grips with the reduction of manufacturing in the US and the impact this has had on cities like Ypsilanti and the middle class. Until we come to grips with this issue and find a viable replacement for manufacturing, we will be faced with this challenge for many years to come.

Goober

Sat, Oct 22, 2011 : 6:06 p.m.

Cities like Ypsilanti must consider merging with other cities, where overhead can be shared. This would allow police and fire personnel to be maintained at the necessary levels based on population, but management reduced based on the merger. I'll bet there are significant savings in this concept and idea.
Also, I'll bet there is still waste to be reduced. If Ypsilanti could make their full, detailed budget available for all to see, the citizens would help the city leaders identify the waste to be eliminated.

Andrew Jason Clock

Sat, Oct 22, 2011 : 5:57 p.m.

Continued
Our planning commission and historical district commission should be guiding development in a way that protects our interest but is not draconian. A company should like Corner Brewery, who has supported and promoted Ypsilanti in so many ways, shouldn't have to fight for months to expand their business. Home owners should not be hamstrung by a group of people that wants everything to look like it did when they were children. Again, if you're going to have an outrageous tax rate, then you should at least be easy to work with.
Paul, if I ever hear you say we are transitioning to an arts and entertainment based economy I'm going to scream. Not because I don't think that's true, but because council utterly fails to do anything to support that notion, and in many cases, has hindered that action. From the Ypsitucky debacle to the festival tax, council had made you a liar. Your failure to direct the DDA to help promote arts and entertainment (or our city in general) has proven you only give the idea lip service.
Fix the pension and health care problem. An EMF won't hesitate to slash benefits. You can't afford to leave them alone.
I'm not saying taking these steps will save our city. They won't. What I'm saying is, if you want us to work with you to save the city, then get everyone on that page. Ypsilanti should have no job other than trying to reverse its declining tax base. You cant just keep bailing water, you have to work on stopping the leak.

Andrew Jason Clock

Sat, Oct 22, 2011 : 5:35 p.m.

When will council pull its head out of the Water Street sand and look at the whole picture? When are we going to see action from the city to reverse declining revenue in the long term by making our city more inviting?
When will you direct the DDA to put effort into promoting Ypsilanti as a place to live, work and play? Almost all other DDAs in existence work promote their city through sponsoring festivals and events to bring people in and showcase their city. Ypsilanti needs that help more than most, but our DDA is consumed with dumpster enclosures and crosswalks and bickering about who should resign.. None of that matters without people coming to the city. Get the DDA on task.
Our city government is notoriously hard to work with when it comes to inspections and regulations when building a home or business. If we are going to pay the highest possible taxes, and get the least possible services, those services should be a pleasure to work with. Does every inspector really need to visit (and charge) every project three times?
If I hear one more member of council talk about how much a piece of Water Street is worth, I will stand up, point, and laugh out loud at them in open council. I will gladly be kicked out if it helps everyone realize that that land is all equally worthless until something happens on it. That something could well be the Washtenaw County Recreation Center. At the very least, its our best, and really only, shot. The county is trying to give us a gift, to create a world class linear park system that will bisect our town from Factory to Forrest, and be anchored with a world class recreation center. While we can't prove this will bring people and development, the evidence in other communities strongly supports that thought. Get what you can from the county, preferably in the form of infrastructure in a yearly lease fee, but for gods sake get the deal done. This facility is going to make Water Street look more attractive where ever its located.

Monica R-W

Sun, Oct 23, 2011 : 8:25 p.m.

I agree with this poster. For the City of Ypsilanti not to consider the offer by Washtenaw County to develop a Recreational Center on the Water Street Property is fool-hearted at best.
This is a solution and might even gain some support from Ypsilanti Township IF it can be done, as the Ypsilanti Twp. Rec Department is honestly not large enough to run all the programs they could to gain additional revenues.
Ypsilanti City Council REALLY NEEDS to reconsider this proposal. Sadly, if not, the future predicts a emergency manager selling off public lands, including the Water Street property to PRIVATE developers.

Bill Ware

Sat, Oct 22, 2011 : 3:52 p.m.

I've never been to Ypsilanti - or Michigan for that matter. But what I read here has the eery look and feel of what's going on with a number of cities here in California. It's sad to say, but, beyond the civic pride and communal bond that cities foster, the painful economic reality that we all must wrap out hands around is that some cities aren't capable of existing as such -- and probably shouldn't.
Legally, it looks as though Ypsilanti has exhausted all of the reasonable and feasible options available to it -- even many of the draconian ones. None appear sustainable. Give Water Street back to the bondholders and tell them to sue. If they find the money to cover the debt service, then fine. Challenge them to find it. But holding the citizens and taxpayers hostage over the bonds doesn't sound like a good thing, either.
If the bonds are so sacrosanct, then give the city back to the county/state and let them pay for it.
Don't mean to start a war here, but if the money isn't there, then the money isn't there. There's no there, there.
Bill R. Ware
Blogger/Webmaster
Cities In Financial Distress
<a href="http://www.citiesinfinancialdistress.com" rel='nofollow'>http://www.citiesinfinancialdistress.com</a>

Monica R-W

Sun, Oct 23, 2011 : 8:20 p.m.

Plus the bondholders will sue, costing the City of Ypsilanti and its' residents even more money in the end. The only solution at this time is to INCREASE REVENUE by RAISING TAXES by creating a CITY TAX. What else do they have left....a emergency manager paid for in the end by the same tax payers! That is a no win solution in my humble opinion.
Monica RW
Reach Out Job Search News/Radio
<a href="http://www.reachoutjobsearch.com" rel='nofollow'>http://www.reachoutjobsearch.com</a>

Michigan Reader

Sat, Oct 22, 2011 : 6:36 p.m.

The city can't give Water Street land back to the bondholders--it was confiscated by the city from business owners under Michigan's then existing eminent domain law. The city is stuck with it, because I doubt it could be sold even, with the prevailing economic conditions. There's no lienhold right by the bondholders.

Cash

Sat, Oct 22, 2011 : 2:22 p.m.

This seems like an almost hopeless situation.
And it brings up once again my biggest issue with Washtenaw County....that is the LACK of a County Executive. Oakland and Macomb are doing well attracting the new auto plant growth...i.e.....JOBS. Washtenaw has closed and boarded plants surrounding Ypsilanti area and nothing is done about it.
Rather as we see almost daily reading posts here, our own Washtenaw County residents enjoy taking potshots at the eastern Washtenaw area. We are our own worst enemy!
Ypsi area has suffered the most from the plant closings, losing thousands and thousands of jobs and a huge tax base..... and then the major auto industry players wiped their hands of Ypsi area while taking a fortune in tax money, including tax money from Ypsi residents, for bailouts!
Meanwhile Washtenaw as a whole...declines. We see on the news meetings with Oakland and Macomb County execs with Ford, GM, and other PRIVATE industries.....where is our representation at the business table???
I'm not an Ypsi resident but their success is important to me. No man is an island.
I guess I wonder...how do we go about getting a county executive who can get this county moving into some private enterprises that increase the tax base and give us jobs?

Cash

Sat, Oct 22, 2011 : 11:24 p.m.

Well, it sure is alive and well in Warren as the announcement Friday made clear!

sbbuilder

Sat, Oct 22, 2011 : 8:24 p.m.

Although I agree with you, I'm afraid that by the time someone comes up with a jobs idea miracle, it will be far too late.
Manufacturing has in many ways permanently left our shores, and that is mainly our fault.
This City, like many in our country, is holed beneath the water line, and I'm afraid there is little to be done to keep it from going down.

sbbuilder

Sat, Oct 22, 2011 : 1:12 p.m.

Nowhere did I see mention of cutting salaries or benefits, only reducing numbers of staff.
If the City is in such dire straits, why isn't this being considered?

Monica R-W

Sun, Oct 23, 2011 : 8:16 p.m.

Sbuilder, you obviously skipped right past this point in the article....
&quot;Declining property values are projected to reduce general fund property tax revenues from $6.7 million in 2010 to $4.4 million in 2017. This 35 percent revenue decline decimates funding for police and fire services as well as administrative functions at City Hall. Cutting staff to balance the general fund budget would eliminate 41 current employees, including some police officers and firefighters. The result would be a city with less than 32 employees by 2017. Reducing public safety and other city services is an untenable option.
Over the past decade Ypsilanti has significantly cut its budget. In 2003, the city Parks and Recreation Department and funding for human services was eliminated. In 2008, 14 vacant staff positions were eliminated, including six in the Police Department. In 2010, the city laid off two police officers.&quot;
Not filling positions, cutting departments, not hiring additional police and firefighters for the city of Ypsilanti. What more should the city cut? Do you have any real suggestions or ideas, because it appears the cuts have already occurred and the problems are not solved.
Cutting your way out of problem is not the end all, be all as the City of Ypsilanti has proved.

Cash

Sat, Oct 22, 2011 : 2:23 p.m.

As I recall there was a contract with a pay cut announced recently. I do not know about the non-union cuts or increases.

Ron Granger

Sat, Oct 22, 2011 : 2:02 p.m.

That's a tough one. The staff cuts mean people are already doing extra work. Anyone who is good can go work in the private sector... where there isn't the constant threat of bankruptcy, no money, etc.
Face it - this is going to be a &quot;on the verge of bankruptcy&quot; situation for many years to come. Who would want to work in that bleak environment? Colleagues who thought they had stable government jobs getting regularly laid off, with no way to sell their dead-end ypsi houses. And then you regularly have people complaining that &quot;you make too much money!&quot; &quot;Your pay and benefits need to be cut!&quot; &quot;Your (sic) a parasite on the taxpayers!&quot;
It's hard to imagine anyone really good would want to stay in ypsi government. There's the private sector, the university of michigan, etc. So if there are still people who are really effective and good at what they do, they need to work to retain them. Because these problems aren't going to fix themselves, and they aren't going to get fixed by &quot;average&quot; employees.

Ron Granger

Sat, Oct 22, 2011 : 12:49 p.m.

Local aritsts should collaborate on a piece that reflects the folly of the Water Street project. The absurdity, the overreach, the spending other peoples money... The lack of a public vote on enormous expenditures of tens of millions.. The lack of accountability.. And it should have a plaque that lists the council members who made it happen and voted for it.

Ron Granger

Sat, Oct 22, 2011 : 12:43 p.m.

From what you describe, Ypsilanti sounds like the next Flint. If so, Ann Arbor doesn't need a green belt but rather a wall to keep the crime out.

Mark Hergott

Sat, Oct 22, 2011 : 12:09 p.m.

I suppose the answer is to consolidate services with the townships. Indeed, if we offered road patrols to Superior and Ypsilanti Township at a cost lower than that of the county, as well as more of them... they might take that up. As for fire, I really don't care if the engine that responds is yellow or red, just as long as it responds. Making an Ypsilanti regional fire authority with one tax base might reduce costs as well.
A water street debt retirement bond and steps to integrate ourselves with the township are things that I will get behind.
I am still upset over the Grove street vote. It wasn't very neighborly. In fact, seeing as we ought to start acting like family more than neighbors, it was downright... disappointing.

betsytownship

Mon, Oct 24, 2011 : 1:47 p.m.

The cost of policing in the city is more than double what the sheriff charges. There is no reason why the township should join with a dying city on any service consolidation. Fix your own problems!

eastsidemom

Sat, Oct 22, 2011 : 10:28 a.m.

The question remains Mr. Mayor, if we were to try and tax ourselves out of this mess that the prior council brought us...could we even pay it off? Is it even possible? I read previously here in AnnArbor.com that with a millage and an income tax we would still not be able to cover this debt. What are the numbers? We need facts.